Some businesses will operate as partnerships or Limited Liability Partnerships (LLPs). Traditionally, the partnership model has been the preferred model for businesses operating in the professional sector and the LLP is becoming increasingly popular.
Partnerships and LLPs can carry both advantages and disadvantages. The participants in a partnership and LLP have greater flexibility as to how they regulate their affairs.
This flexibility may prove useful in complex tax and succession planning. A partnership or LLP may sit alongside another business vehicle such as a limited company. This type of arrangement is frequently found in the medical sector.
The team at George Green has extensive experience in the law relating to partnerships and LLPs. We work closely with our dispute resolute team in the context of partnership disputes and with the commercial property team where commercial property is held in an LLP or partnership.
The Partnership Act 1890 regulates partnerships and implies certain terms into the partnership relationship, some of which may be inappropriate in modern commerce. It is advisable for all partnerships to have an appropriately drafted partnership agreement. A properly drafted partnership agreement will reduce the scope of dispute between partners and deal with matters such as the sharing of income and liabilities, capital, management of the business and admissions to and retirement from the partnership.
A disadvantage of the partnership model is that partners risk unlimited personal liability and this risk is borne between partners on a joint and several basis, making each partner liable for the acts of a fellow partner.
An LLP has some of the flexibility of a traditional partnership but has the advantage that the LLP member is not jointly and severally liable for the acts of other members. A member still faces personal liability for his own acts and omissions and a member may lose their capital and any undistributed income in the event of the failure of an LLP.
LLPs have certain statutory filing obligations and a bespoke members’ agreement is always advisable to regulate as the sharing of income and liabilities, capital, management of the business and admissions to and retirement from the LLP.
Mergers, Acquisitions, Retirements and Admissions
George Green has wide experience of handling mergers and acquisitions of partnerships and LLPs. We advise existing businesses on the admission and retirement of partners and members and individual members and partners on the terms of their admission and retirement, as appropriate.